Is Schedule E rental income eligible for the 20% deduction? It depends. The break applies to QBI from a trade or business. IRS refers to the standard under federal tax code Section 162 for defining a trade or business. This standard is unclear in the context of rentals because it’s based on a taxpayer’s specific facts. A safe harbor applies if at least 250 hours are devoted to the rental activity by the property owner, employees or independent contractors in a given year. Time spent on repairs, collecting rent, negotiating leases and tenant services count. Hours put in driving to and from the real estate aren’t included for this purpose. If the 250-hour test is met, you can treat the rental as a trade or business for purposes of the QBI deduction. There are stiff recordkeeping rules to comply with. See Notice 2019-07 for the details, including how to elect the safe harbor. The safe harbor rules aren’t set in stone. IRS says it’s open to tweaking them. An influential accounting group has asked IRS to lower the hours threshold to 100.